For the last few weeks the equity markets have been stuck in a very choppy trading range. However the market has formed a pennant formation and its nearing the tip of the formation.

This formation would imply a breakout is nearing, but will it be to the upside or downside? In the past few weeks, our signals have been mixed, thus showing their is confusion in the markets. We do have some longer term overbought signals and short term signals calling for a bottom nearing.

As the world appeared to be melting down in February and early March, a behavioral perspective would indicate almost any kind of good news became great news. Now that the economy is starting to show some stability, more solid news is needed to prove we are moving forward. As we noted in an earlier comment, confusion has been the name of the game as we have been getting better than expected and less than expected reports. This past week has been no exception to the choppy action. For instance today at 8:30 am, the Q1 GDP preliminary number was released and it showed a better number than was originally released, but not as good as expected. Original report was -6.1%, Market expected -5.5% today and it was reported at --5.7%. The GDP deflator reported 2.8% and near expectation of 2.9%. At 9:45 am the the Chicago Purchasing Manager's Index was released with an expectation of 41 and it was reported at 34.1. At 9:55 am Michigan Consumer Sentiment index was reported better than expected at 68.7. The market expected 67.9. So what's a trader to do?

From a technical aspect, it would actually be healthy to see the market break to the downside to about 7,700 with a first level of support around 8,000. The market would do its consolidation thing, cleanse itself and then make a move towards 9,000 if more stronger economic reports are released.

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